G/W's & McRae's Objectives In the fog of a proxy battle, truth is hard to come by. McRae is putting maximum spin on his story, stretching the truth where it suits him to portray himself as wearing the white hat. Witness his story in the Belleville Intelligencer. Similarly, G/W labels everything McRae does as evil.
We may get clarity on July 18th in the court hearing. McRae may have to answer questions from the witness stand under oath. If McRae tries to spin the judge, his day may go badly for him. There may also be a pre-hearing "examination for discovery" session. I might try to attend the hearing if it is in Toronto, just so I can hear the sworn truth about Bioniche. But my guess is McRae will fold his cards prior to the hearing and call the Special Shareholder's meeting, just to avoid testifying. At that point he will have gotten maximum delay out of the legal steps without going to court.
What are G/W's objectives? My current hypothesis about G/W's objective is that the "major US private equity firm" [per McRae's open letter to shareholders] owns several animal health companies that they have fixed up and want to take public again. The private equity firm heard of Bioniche and saw the potential for synergy by running the revenue for several companies through one management team. This is a "reverse takeover that Chairman Rae has experience in implementing. But they needed a reliable leader for their public company who would have market cred. So they found G/W and asked them to lead the initiative. It is possible the US private equity firm also has a significant share holding in Bioniche. Less than 10 million shares do not have to be disclosed. Their initial offer was to buy the Animal Health assets. When that was rebuffed, they persisted because the synergies were too attractive to walk away from.
What are McRae's objectives? These are less clear to me. It is possible (as some posters suggest) that he really is not selling Animal Health. It is just a decoy. A negotiating ploy during licencing of Urocidin to convince licencing parties that he can wait them out because he will have plenty of cash. He said he rejected the initial G/W bid because "the deal terms proposed were not in the best interests of all shareholders" [per McRae's open letter to shareholders]. He did not say the price offered was lower than other offers. He may frustrate all bidders for Animal Health by rejecting their offers during negotiations. What evidence suggests he is not serious? He said in the newspaper article "I had a funny feeling, though, in one of the first meetings and said 'What are you guys thinking here because you don't know anything about animal health?' ". But I say, who cares if they know nothing about AH if they buy assets? Just get a certified cheque. What happens after that is their problem. This comment is what leads me to believe he is not really selling Animal Health.
On the other hand, suppose he is serious about selling Animal Health. what are his criteria for deciding which is the "best offer"? As shareholders, we like to think that the biggest selling price is the answer. But that may not be McRae's top criterion. Here is my possible list of ways to assess the deals (in order of priority with McRae):
- Protect employee jobs in Belleville. Synergies when combining other companies with Bioniche must come from eliminating other companies' jobs.
- Keep the head office in Belleville.
- Give McRae a ceremonial position in the new company and a company-paid leased Lexus.
- Handle collateral obligations effectively.
- Be tax-efficient for Bioniche to protect the non-capital loss carryforwards for tax purposes.
- Pay with cash up-front instead of with milestones.
- Pay the highest price.